Commercial Management Flashcards
1
Q
What is a Cost Value Reconciliation?
A
- Cost value reconciliation is used to measure the projects ongoings costs and income against budgeted
values at the start of the project. - This allows the profitability of the project to be determined at a given point in time throughout the
project lifecycle.
2
Q
How would you prepare a Cost Value Reconciliation?
A
- I would determine the cumulative costs and value of the project to a set given point in time.
- The cut-off date may coincide with an agreed accounting period or month end period which I would establish with the project management team.
- I would carry out cost checks to ensure that:-
o No high value fluctuations in costs or value are expected during the reporting period.
o That all work in progress is accounted for and the reported values are inline with
subcontractor’s measures and liabilities.
o Risk and contingency items have been included for items not yet agreed.
o When all costs and value items are finalised I would then determine the current profitability of
the project and compare this against the original budgeted values.
3
Q
How do you ensure your Cost Value Reconciliation is accurate and up to date?
A
- The forecast revenue on variations is only reported when variation items are agreed.
- A reduced percentage profit is assumed if variations are paid on account or partly agreed.
- Contingency items are retained with the CVR for any unknown or pending cost items.
- I regularly arrange meetings to conclude the agreement of variations for each of the sub-contract
packages so a backlog of items pending does not form.
4
Q
What is a Cash Flow Analysis?
A
- A cash flow analysis highlights the movement of income and expenditure into and out of a business
over time. - If the level expenditure going out of the company is higher than the income, the cash flow is classed as cash negative and may highlight the need to make additional funding arrangements.
5
Q
How would you compile a cash flow?
A
- To calculate the project incomes I would look to utilise the agreed payment schedule set out under the
terms of the contract, the programme and the BoQ or Activity schedule. - I would then accurately profile when the income is anticipated to be received and plot these dates on the cash flow forecast.
- If this information is not available it may be possible to use information cash flow analysis software to plot a typical S-curve.
- For the outgoings I would liaise with the supply chain to gain an insight of when invoices and payments are expected to become due taking extra care to account for any long lead items.
6
Q
Please explain your understanding of the term ‘Accruals’?
A
- Accruals are made within the financial accounting systems that are operated to take into account anticipated invoices that are not yet paid.
- The accrual can be calculated as the difference in the total liability that is due to a sub-contractor or supplier against the amount already paid to date.
- The accruals are retained as anticipated cash outflows not yet incurred and in theory the older the accruals are, the less likely they are to paid and may be released at a given point in time.
7
Q
What is Company Overhead?
A
- Company overheads are ongoing expenses incurred as a result of the day-to-day operations of the
business. - They are items that need to be incurred in order to provide critical support to the revenue generating
arms of the company for example factory rental costs, heating and lighting. - They are classified as fixed overheads which do not change for example monthly rental costs and
variable overheads which do change depending on business activity for example heating costs.
8
Q
What is the purpose of maintaining cumulative accounts and payment procedures?
A
- Reporting, invoicing and processing of payments is done on a cumulative basis to ensure the full extent
of the financial information is accounted for. - If this is not adopted and invoices are made ‘in the period’ mistakes can be made and double counting
may take place. - It is much safer to work on a cumulative basis as the risk of double counting or missing invoices is
reduced.
9
Q
Please explain your understanding of the term ‘Earned Value Analysis’?
A
- Earned Value Analysis is a technique used to forecast the final financial position of a project.
- The technique compares the current progress achieved to date with the planned progress at a given point in time.
- It also considers the current costs incurred with planned costs over the same time period.
- The EVA determines what value of work would have been achieved and what costs would have been incurred if the works had been on programme to forecast future performance and to highlight potential cost overspends and time overruns.
10
Q
What Contract Administration Controls do you implement?
A
- Utilisation of payment and valuation schedules to ensure all parties are aware of key dates in accordance
with the contract and Housing Grants Construction and Regeneration Act. - Running final accounts to ensure each party is informed of any adjustments, claims and variations.
- Regular review of revised drawings and contractor’s instruction to ensure all variation and claims items
are captured.
11
Q
What procedures do you adopt for supply chain and sub-contractor management?
A
- My company maintains a database of potential suppliers that allows categorisation of specific trades
with a current status of either pending approval, authorised or not to be used. - These categories are based on previous performance in combination with undertaking regular checks
on items such as insurance certificates being provided, credit checks, maintenance of accident records
and obtaining copies of quality management accreditations. - Performance checks will include items such as Health & Safety track record, quality reviews, remedial
work requirements, programme delays, commercial and contract administration performance.
12
Q
What procedures do you undertake to resolve sub-contract final
accounts?
A
- Throughout the project I would maintain a running final account of the sub-contract package and look
to agree any variation items with the sub-contractor on an ongoing basis. - Having the running final account in place in my experience has supported with reaching a swift final account agreement.
- Prior to arranging the final account meeting I would collate the following items to support the discussion:-
o The subcontract order agreement including the BoQ or pricing schedule.
o The final account submission or final subcontract application for payment.
o Details of all variations or changes with full substantiation
o Supporting quantities or take-offs for any re-measurable items. - During the meeting I would run through the agreed and any pending adjustments with the sub-
contractor. - Following discussions and agreement during the meeting I would circulate the final account statement
for signature by both parties and hold this on file.
13
Q
How did you gather and analyze data to estimate that the project would only spend £900k in the 23/24 financial year?
A
14
Q
How did you create the resourcing profile?
A
15
Q
How did you determine the project management cost for each team member involved in the project?
A
16
Q
Can you explain how you spread out the project management cost across the program?
A
17
Q
How did you integrate the timing of contractors’ work and costs into the cost forecast?
A
17
Q
What factors did you consider when establishing the timing for contractors’ work and associated costs?
A
18
Q
Can you elaborate on how you incorporated quotes provided by contractors into the cost forecast?
A
19
Q
How did you ensure that the cost forecast was adjusted accurately each month based on progress on site?
A
20
Q
Did you encounter any challenges or difficulties while preparing the cost forecast for the Mercury House project? If so, how did you address them?
A
